Spree

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


$108 Billion Fund Plans London, New York Hiring Spree [Bloomberg]

Australia’s largest pension fund plans to open an office in New York and expand in London as it outgrows its local market and seeks more investment opportunities overseas.

Mark Delaney, the chief investment officer of AustralianSuper Pty, said the more than A$155 billion ($108 billion) fund will have 30 employees in New York by 2022, focusing on property, infrastructure and private equity investments. Its London office, currently home to about 10 staff, will grow to around 50 by the same date, with a focus on property, infrastructure and foreign-exchange dealing, he said in an interview.

Headline writers just love a good spree. Well, I’m sure they don’t love a killing spree, per se, as headline writers are people, too. I think. But the word “spree” is so evocative in narrative-world, implying at a minimum some sort of wantonness and excess, some sort of moral bankruptcy.

The article itself is fairly humdrum. It’s another triumph of scale in the modern financial world, this time in the form of an Australian superannuation fund.

But this is where we are in 2019.

The financial services world is so threadbare … so slow-growing and right-sizing and mundane … that now it’s a “spree” to open up a New York office. With 30 people. By 2022.


Amazon, Facebook and the Modern Trust [the ET Zeitgeist]

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


Amazon.com’s Ad Prices Could Soar Next Year [Fox Business]

There’s even an opportunity for Amazon to develop its own ad optimization tools like Facebook or Google.

As advertisers see improved return on investment from their optimization efforts, they’ll be willing to spend more per impression or click.

This is a story that I’ve heard Howard Lindzon (@howardlindzon) tell a dozen times …

Back in the olden days, and by that I mean 2012 or thereabouts, Facebook didn’t charge nearly enough for its ad inventory. With a pretty modest budget, a start-up company with a mass-appeal product or service (LifeLock, for example) could get a stellar reach into a crazy number of households.

Those days are long gone. Today you can still get a good reach into whatever number of households you want by advertising on Facebook, but there are no more bargains to be had. Want a crazy number of households? Then it’s going to cost you a crazy amount of money.

From a narrative perspective, what I find interesting is how Facebook’s price increases were implemented under the narrative of “optimization”, as if Facebook were doing you a favor by raising their prices so much.

Sure, the ads today are more targeted and (maybe) more effective, but the price increases and supply decreases are FAR GREATER than the (maybe) improved efficacy. That’s what it means to have pricing power, and that’s what it means – in the modern sense of the word – to have narrative power.

To date, Facebook has been really good at understanding narrative power from the perspective of intellectual property.

But also to date, Facebook has been really terrible at understanding narrative power from the perspective of government and the regulatory State.

Now Amazon is following in Facebook’s footsteps, both in its utilization of the narrative power of “optimization” and in its utilization of the raw pricing power of a monopoly.

Both Facebook and Amazon are smiley-face monopolists, claiming a narrative of efficiency and competition when nothing could be further from the truth. The only difference is that I suspect Amazon will be really good at the regulatory-compliant narrative, too.

No matter.

Time to break up the trusts. Again.


Never Run the Same Gag Twice [The ET Zeitgeist]

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


It’s Never Been Easier to Be a C.E.O., and the Pay Keeps Rising [New York Times]

In our annual ranking, we’re used to seeing paydays so big that they’re difficult to comprehend. But 2018 posed a problem on an entirely new scale. The pay package Tesla promised to Elon Musk was so large, we had to add an extra dimension to the chart below to display it accurately.

You don’t run the same gag twice. You run the next gag. – Ocean’s Eleven

It’s the best line in a movie full of great lines.

Elon is running the next gag.

The Holiday Zeitgeist – 5.26.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories. On the weekend, we leave finance to cover the last week or so in other shifting parts of the Zeitgeist – namely, politics and culture. It’s not a list of best articles or articles we think are most interesting … often far from it.

But these are articles that have struck a chord in narrative world. 


In lieu of the usual narrative map here, a brief note to our regular Zeitgeist readers: beginning in the next week or so, you should see a site re-design that will change how you see this content:

  • We will be separating the ‘curated’ content into brief individual notes throughout the day, which will allow us to cover topics published throughout the day as opposed to just in the morning.
  • You will either be able to access Zeitgeist content by either (1) clicking The Zeitgeist in the Content menu at the top of the site, or (2) reviewing the individual inks on the “ticker tape” at the top of the home page.

It’s Not Just the Citizenship Question – the Digital Divide Could Hurt the Count of Latinos in the Census [Route Fifty]

This is about the census, but those who read our inaugural ET Election Index will recognize shared DNA with one of the most interesting narrative clusters that emerged from the early primary process: ‘this is election where Latino voting patterns are going to matter.’

I don’t have any insight into whether that is true, but we have consistently found that high attention narratives with limited coverage tend to become highly covered narratives. I feel confident saying you will read a lot more stories about this topic in the coming months.


The FDA Tells the Food Industry to Change How It Uses ‘Expiration’ Dates [Gizmodo]

The food label is a great case study in the core concepts of narrative construction. Most obviously, of course, the label is an opportunity to create and support the identity of the brand being sold. How are you being told to think about the brand?

Even the rules promulgated by the FDA for food labeling, however, railroad both food design and presentation into certain directions. We have long recognized the food pyramid, FDA guidelines and information provided on nutritional labels as a rather goofy cartoonified version of nutrition. But the target of this article is an entirely different cartoon, one I daresay it’s about time the FDA dealt with: expiry and best-by dates.

Image result for expiration label on salt

April 2020? I buy a bottle of Himalayan Salt that precipitated 600 million years ago in the late neoproterozoic in whatever part of Gondwanaland Pakistan belonged to, and of course they give me the grains that are just about to go bad!


Letter: Mink the bear isn’t the problem [Concord Monitor]

Even with the strong pull of the Zeitgeist in national media and global always-on conversations, my heart is warmed when I am reminded that there is always room for a crazy-ass letter-to-the-editor in a local paper.

You keep doing you, Mink the Bear and Mr. Williams.


The Sublime Sensation of the Swimming Hole [Smithsonian Mag]

Hamilton Pool

I suppose it shouldn’t bother me as much as it did, but I spent a good amount of time enjoying the wonder of this place. It’s called Hamilton Pool, and it’s a popular natural location about halfway between Spicewood and Dripping Springs, two of the most Texan places in Central Texas. Opie’s BBQ in Spicewood is, by the way, a criminally underrated beef enterprise worthy of visiting if you ever make it out to Hamilton Pool.

It has always been crowded, and in the last decade or two, you really had to line your car up pretty early to be assured of a good day there. But now, apparently, Hamilton Pool has to be booked online. And it’s even worse than that – apparently monopolization and resale is a thing already.


The whole idea – the very meme attached to swimming holes, at least to me – is that of a found thing. A place that only some people know about that you think you remember how to get to, and which has a rope someone attached some years ago, and it is probably still safe. It’s Holy Theatre and Rough.

I don’t have any good answers for the realities that rapidly expanding populations and broadened wealth – both good things – have forced upon our experiences with nature. There are more of us and more who can now afford to see and do these things. Commercialization and order are almost certainly the fairest ways to manage limited supply, I suppose. That doesn’t change how viscerally my brain responds to the idea of booking a reservation to Hamilton Pool, though.


The Meaning Behind the Democrats’ Infighting Regarding Impeachment [Epoch Times]

I would tell you my opinion on the political import of impeachment discussions, but I am starting to recognize that those opinions are consistent with the emerging narrative. Oh sure, I might argue that I thought them first, but there’s enough reason to doubt the provenance of my views.

What would that opinion be? What is the emerging narrative?

“Continuing to discuss impeachment is a zero upside, 100% downside political maneuver. It will fuel division and rhetoric that benefits extreme candidates – and Trump – and doing it outside of whatever is necessary to placate is a risky move.”

Yes, this particular opinion piece is written by an author from the right, but there’s a reason this ranks so high in the Zeitgeist. I’m more confident this is the narrative, and correspondingly less confident in the independence of my opinion.


What Does the Release of John Walker Lindh Mean? [New York Times]

Yeah, look, I’m all for talking about how we turn people into symbols and then talk about the symbol. That’s kind of what we do here, after all.

But just so that we are super, super clear, the person or persons who greenlighted this revisionist John Walker Lindh fanfiction at the paper of bloody record can go straight to hell.

Going Gray

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


Huawei Founder Says U.S. Won’t Disrupt Business As Analysts Warn Of Sales Slowdown [Forbes]

The U.S. Commerce Department has deemed Huawei a threat to national security, and banned the company and almost 70 of its affiliates worldwide from acquiring U.S. technology without government approval. On Monday, Huawei was granted a 90-day reprieve that allows the company to continue purchasing American goods for its existing handsets and broadband networks until Aug 19.

Ren Zhengfei is 74 years old, yet like all septuagenarian and octogenarian Chinese potentates, he has jet-black dyed hair. But is that a wisp of gray in this picture? I kinda think it is. That’s a big deal in China … they call it “going gray” … when you’ve been disavowed by The Powers That Be and they take away your hair dye. Because you can’t be rehabilitated from that.

You think I’m kidding. But I’m not.

Here’s Bo Xilai, party secretary (i.e., mob boss) of Chongqing, a city with a metropolitan area roughly equal in size to New York.

And here’s Bo Xilai at his murder trial in Beijing.

Pro tip: Bo Xilai’s real crime was not murder. Although … that, too.

How will you know when China is backing down from a national security-oriented trade war with the US?

When Ren Zhengfei is photographed with gray hair.


Narrator: The cause-and-effect was, in fact, that simple

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


The Fed Is Likely to Make an ‘Insurance’ Rate Cut [Bloomberg]

With the bond market pricing in at least one interest-rate cut by the Federal Reserve this year, there’s a debate whether such a move would only serve to benefit riskier assets. Federal Reserve Bank of Kansas City President Ester George recently said lower rates might spur asset price bubbles, create financial imbalances and eventually lead to a recession. Perhaps, but the cause-and-effect isn’t that simple.

Narrator: The cause-and-effect was, in fact, that simple.

The Zeitgeist – 5.22.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 22, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Go Wide, Not Deep [Morningstar]

We think core menus should be wide, not deep—that is, menus should offer exposure to a wider array of investments but not multiple options for the same asset class (with the potential exception of an active and passive option). The idea is to offer a range of investments that will better help participants achieve their retirement goals. We think it’s important to give participants access to funds with unique risk characteristics so they can supplement allocations in their other accounts (such as an IRA) as well as give a financial advisor (who is not associated with the plan) the ability to design a portfolio inside the plan. These funds can also be used by in-plan advice providers, such as managed accounts, to build better portfolios.

Retirement plan menus are ground zero for what is delightfully referred to as “choice architecture” … steering and nudging you into making the “right” choice.

If you don’t like what’s being said, change the conversation.
― Don Draper

Ad men understand “choice architecture”. It’s not called the Wheel. It’s called the Carousel.

I’ll make him an offer he can’t refuse.
― Vito Corleone

Mob bosses understand “choice architecture”. An offer you can’t refuse is what game theorists call a Hobson’s Choice, part of a more general class of games that includes ultimatums and dilemmas.

Like all ad men and mob bosses, Morningstar is in the choice architecture business.

And yes, there’s an Epsilon Theory note for that:


Analysts Make Research Cooler, Wonkier and Bespoke to Lure Cash [Bloomberg]

As the industry wrestles with the problem of making money on its own, the stage is set for podcasts and novella-length thematic analyses.

Yes, please.

“Luring cash” … FFS, people.


Quality corn stover in high demand [Hay and Storage]

I went back down through the line and took a closer look at the corn stover quality in the back row that had not sold yet. One load in particular caught my eye. After confirming there was no mustiness, mold, or mildew on the crinkled corn husks, I asked Eric Motter of Myerstown to share how he produced his 7,500-pound load of 3×3 bales weighing a little over 500 pounds each.

He planted the third week of May and the Roundup Ready hybrid only received manure. I could clearly see the corn held its color until harvest and it yielded well. No foliar fungicide was applied.

I have no idea why an article from Hay and Storage was linked so centrally to financial media, but I am so happy that it is!

Of course, I actually DO have an idea why farm esoterica is a central narrative in financial media today, as farmers are the casualties of this trade war.

It’s not just the corn crop that has only received manure this season.


US stocks have crushed their European peers by 76% over the past decade. Here’s what Goldman Sachs says needs to happen for Europe to flip the script. [Business Insider]

Saved you a click.


Global markets are rallying after Trump tempers his Huawei ban after ‘big reality check’ [Business Insider]

US, European, and Asian stocks rose on Tuesday after Trump tempered his Huawei ban.

The Chinese telecoms giant can buy US products to maintain its networks and release software updates, but it can’t buy American components for new devices.

“This latest move by Trump shows just how haphazard his policies are and also how pervasive Huawei goods and technology are,” said Jasper Lawler, head of research at London Capital Group.

This was the actual graphic associated with this Business Insider “article”. It’s a stock photo from Getty, and I suppose it’s what you get when you search for “Yay, Huawei!”.

And then there’s the obligatory anti-Trump commentary from some London dude, criticizing the “haphazardness” of US policy. As always, there’s no parody like self-parody.


The Zeitgeist – 5.21.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 21, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Washington’s Huawei reprieve triggers relief rally in bruised EU chip stocks [Reuters]

Shares in European semiconductor companies, one of the most sensitive sectors to the global trade tensions, recovered from their worst day in 4-1/2 months on Tuesday after the White House backtracked overnight on tough limits on China’s Huawei.

If you’re playing this game out of necessity … my condolences.

If you’re playing this game out of choice … you’re nuts.


Rise in CMBS IO Loan Issuance Surpasses Pre-Recession Levels, Worrying Some in the Industry [NREI]

Competition that is fueling a spike in interest-only (IO) loan issuance is drawing mixed responses from industry observers. Some view the spike as a worrisome rise in risk that could come back to bite borrowers if 10-year loans mature in a higher interest rate market. Others see IO loans as an opportunity for borrowers to take advantage of healthy lender competition for high quality deals.

Things you see at a top …


Institutional Investors Think They’re Ready for the Next Downturn [Institutional Investor]

Eighty-seven percent of the 75 institutional investors surveyed by Wilshire Associates say they are more or “far more” prepared for a bear market than in 2007, according to a statement Monday from the consulting firm. About 95 percent of investors are at least “somewhat confident” in their readiness to steer through market volatility, while 39 percent feel “very confident,” Wilshire said.

And they’re right.

Not because they’re doing anything special or have any new awareness, but because central banks Will. Not. Allow. a 2008-style deflationary crisis to exist.

Everyone always prepares for the last war …


The Shocking Number of Americans Without a Retirement Account [Fox Business]

According to the Aspen Institute, close to 6 in 10 working-age Americans do not have a retirement account. Sadly, the Aspen Institute also warns that things are likely to get worse due to the changing nature of work.

“Sadly.”

The American worker is the proverbial boiled frog. Or Milton from Office Space. Same thing.

And yes, there’s an Epsilon Theory note for that. First read this:

And then read this:

Money quote:

Over the past eight years we have thrown our money into relatively unproductive activities (experiential consumption), and we have thrown our bodies into relatively unproductive jobs (experiential production).

It’s as if we’ve intentionally returned to the recommended farming practices of Cato the Elder in 200 BC, where instead of a tractor with a 43 horsepower engine to get the work done, we’ve got “a foreman, a foreman’s wife, ten laborers, one ox driver, one donkey driver, one man in charge of the willow grove, and one swineherd”. Because god forbid we miss out on the experience of being a swineherd. Hey, with modern technology, you can drive for Uberherd swine whenever you like. Just imagine the personal satisfaction, not to mention all that extra cash, that comes with “being your own boss” as an on-demand swineherd.

It’s as if we’ve intentionally returned to the recommended farming practices of Cato the Elder because it IS intentional.


Why High-Class People Get Away With Incompetence [New York Times]

In several experiments, researchers found that people who came from a higher social class were more likely to have an inflated sense of their skills — even when tests proved that they were average.

It’s the only possible outcome of the Lake Wobegon effect … where all of our children are above average. Now they’ve grown up believing that.


The Zeitgeist – 5.20.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 20, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Planning to irrigate arid lands with produced water [Albuquerque Journal]

Encore Green Environmental is jockeying to become the first company to recycle oil-and-gas wastewater to irrigate arid lands in New Mexico.

The Wyoming-based company has developed a patent-pending process to identify all ingredients in oil-and-gas effluent, known as produced water, before sending it on for recycling. Through the process, the company tests and documents all changes in chemical content during treatment to assure compliance with regulatory standards. And it does detailed analysis of soil content and moisture levels in targeted arid areas to make sure recycled water matches the conditions and requirements of soil and vegetation before irrigating.

I have no idea if this is on the level or not. But I have a very strong idea that the ONLY solution to the environmental debacle that humankind is perpetrating on the Earth will come from procedural and bottom-up technological advances like this. Not from someone inventing cold fusion. Not from government-sponsored moon shots. But from new twists on old ideas, motivated by people wanting to do well for themselves by doing good for all of us.


Bonds aren’t a set-it-and-forget-it investment. Here’s what you need to know. [USA Today]

It’s an infomercial from Ken Fisher, who would famously rather die and go to hell than sell you an annuity, and who is a fairly profoundly weird dude. But he’s not wrong.

Today, your long-dated government bonds are a core holding. They should become a tactical holding.

I don’t mean that you sell them tomorrow. I don’t mean that you sell them next week or next month or next year. In fact, if we get a deflationary shock from a Fed-driven recession, a China-driven global credit freeze or an Italy-led Euro crisis, you’re going to want to buy more. This “tactical holding” will be a very large chunk of your portfolio. But make it a tactical holding. Make it something that you are willing to sell. Without hesitation. Without losing your nerve.


Save the Buyback, Save Jobs [Journal of Applied Corporate Finance]

Too Many Companies Are Paying Too Much for Stock Buybacks [Fortune]

Booking Holdings Is Gobbling Up Stock [Seeking Alpha]

I’m not going to give any quotes from these articles, because there’s nothing here you haven’t read umpteen times before. My point here is that whatever you might think about stock buybacks, it really doesn’t matter what you think.

This is now an issue dominated by common knowledge – what everyone thinks that everyone thinks.


Uber, Lyft and Pinterest prove that private investors are sucking up all the value [CNBC]

Marc Andreessen called “the effective death of the IPO” in 2014 and said that with high-flying tech companies staying private longer, “gains from the growth accrue to the private investor, not the public investor.”

Fred Wilson of Union Square Ventures told CNBC the following year that these late-stage IPOs mean “all of the gains are captured among a very small cohort of people.”

In 2016, Alex Mittal of FundersClub wrote that today’s top tech companies are raising gobs of private cash, “leaving the bulk of returns out of public investors’ reach.”

These are the very people that benefit from companies who stay private longer while their valuations skyrocket, because they’re the early investors. They get to ride the valuation up from the millions to $10 billion, $20 billion or $50 billion and then sell their shares to the masses of public market investors who are thirsting for the next Amazon or Google.

The headline is hyperbolic and silly, but what Andreessen and Fred Wilson are saying is not.

What’s the dominant institutional investment narrative today?

Private > Public

It’s really as simple as that, and there are zero signs of this abating or reversing. On the contrary …


Schools Teach Civics. Do They Model It? [Education Week]

But by late 2017, seniors at the high school had grown frustrated by the school’s limited extracurriculars, lack of spirit activities, and punishments for late homework. Inspired by pro football player Colin Kaepernick’s widely covered “take a knee” protests, they decided to press their case through a small but significant act of civil disobedience.

During morning assembly on Sept. 28 of that year, the school’s 15 or so seniors sat down quietly, rather than recite VPA’s “challenge,” a pledge in which they commit to do their best for “myself, my family, my school, and my community.” Some lowerclassmen followed suit.

“We just didn’t like how we were being treated,” recalled Beverly Felipe, a student plaintiff in the lawsuit. “It was very unfair. We wanted some change in the school and we were hopeful that it was going to happen.”

Punishment for late homework! Lack of spirit activities! The horror!

This article gets it all wrong of course. The school’s response in bringing down the hammer IS the teachable moment. And a good one, too.

Know who else talks like this? The guy in the White House.


It was already a proud day for these new college graduates. Then a billionaire told them he’s paying off their student loans [CNN]

Of course I love what Robert Smith did!

My favorite part is the pressure this puts on other billionaires when they get an invite from alma mater.

Then again, most billionaires are high-functioning sociopaths, so they truly believe that their words and moving speeches are reward enough for graduates.


The Weekend Zeitgeist – 5.18.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories. On the weekend, we leave finance to cover the last week or so in other shifting parts of the Zeitgeist – namely, politics and culture. It’s not a list of best articles or articles we think are most interesting … often far from it.

But these are articles that have struck a chord in narrative world. 


May 18, 2019 Narrative Map – Non-Financial Articles

Source: Quid, Epsilon Theory

The Fight Against Anti-Semitism Is the World’s Responsibility [Jewish Journal]

There isn’t much to be said about this, except how depressing it is that articles about anti-Semitism are still among the most-connected to broader narratives in news in 2019.


The Modern Bonfire of the Vanities [American Greatness]

The iconoclasm debate is back on the menu, and the kind of language used by each political pole on this topic is fairly well-established at this point. That means that a story or two, an editorial like this and coverage of Mayor Buttigieg stating his willingness to consider removing art celebrating Thomas Jefferson are enough to bring this back to the front-and-center.

It is a topic that emerges because it is so naturally virulent, and so little subject to mind-changing that the act of bringing it back into the public consciousness seems almost certainly a sign of intent to expand the widening gyre. This ranting opinion article is exactly of that ilk, intended to convince no one of anything, other than to convince anyone right of center to “get mad.” Everyone has abstracted the monuments into whatever issue matters to them, argues on that basis, and all the angry ships from both sides pass in the night.

If the article you’re reading about includes monuments to Jefferson or Washington, consider this a GTC instruction to ask “Why am I reading this NOW?”


The Gig Economy In The Crosshairs: The Ninth Circuit Extends Dynamex Retroactively [Vinson & Elkins]

The article is wonkish, of course. It’s the V&E blog, after all.

But the language of gig economy businesses, wages, and the powerful and rising influence of technology companies on our lives and livelihoods, are all highly connected parts of the Zeitgeist. I think it is likely they will be connected to our upcoming election cycle as well.


The Trailer: The left has pushed the Democratic Party, but Biden isn’t passing the litmus tests [Washington Post]

As we will argue when we launch our ET Election Index in the coming days, while Biden is polling extremely well, the language used in discussions about Biden is among the least connected of any candidate to the narratives and core issues of the campaign. There is plenty of time for that to change, of course, but for now we there’s a meaningful chance that either his dominance begins to fade or his policy platform is forced to move leftward.


The Navy’s probe into sky penis For the first time, the tale can be told. [Navy Times]

  1. God bless the person who wrote this sentence.
  2. God bless FOIA.
  3. God bless the Navy.

See the face of a man from the last gasps of the Roman Empire [National Geographic]

Hedonic adjustments, even in death. Yes, funerals may cost upwards of $10,000, but you really must consider the quality and craftsmanship of this beautiful mahogany-paneled casket before you assert inflation against a shallow rock-lined pit.

The Zeitgeist – 5.17.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 17, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

FEDS 2019-036: Optimal Inflation Target with Expectations-Driven Liquidity Traps [The Fed]

Our main finding is that even a very small probability of expectations-driven liquidity traps (LTs) nontrivially lowers the optimal inflation target. Under various calibrations of the model, a 0.1 percent (quarterly) probability of falling into expectations-driven LTs typically lowers the optimal inflation target by more than 1 percentage point. With a 0.5 percent probability of expectations-driven LTs, the optimal inflation target is typically slightly negative.

How about if you’re already in an expectations-driven liquidity trap?

This is most interesting and important Fed paper I’ve read in years. I know, I know … a low bar, and of course it’s written in the guild cant of academic economics, which is to say it’s barely readable at all.

But FINALLY we are giving the drivers of financialization a name.

Good and important work from Taisuke Nakata and Philip Coyle.

Me, today.


Lighter Capital Closes Over 500 Rounds of Revenue-Based Financing for Tech Startups [Press Release]

“Revenue-Based Financing is popular with entrepreneurs because it combines the best aspects of debt and equity,” said BJ Lackland, CEO of Lighter Capital. “Like equity, there’s a deep alignment between the investor and entrepreneur toward growth. However, the difference with this funding model is the entrepreneur doesn’t give up control or ownership in the same way they would to angels and VCs. This provides entrepreneurs greater options as they continue to grow their businesses.”

Lighter Capital’s fintech platform pulls in 6,500 data points to analyze startups quickly and reduce entrepreneurs’ time to raise funds by over 90%. The company uses proprietary algorithms to determine a credit rating and data science to predict a startup’s revenue growth, with 97% accuracy, on average. By using objective, data-driven practices, Lighter Capital provides $50K-$3M in funding to a broad array of tech startups, promoting diversity of ideas, perspectives and leaders — ensuring that strong, creative thinkers have access to the resources they need, when they need them.

The “best of debt and equity” AND “proprietary algorithms”. It’s a Mister Wonderful bot!

File this under Things You Only See At A Top.


Farmers turning to bankruptcy must consider options [Farm Progress]

Chapter 12 offers relief from a critical issue for many farms — capital gains taxes. Back in the 1980s, when farm values fell, selling land didn’t bring much of a tax burden as a farm “rightsized.” Today, land values are up, and a farmer who bought land at $1,500 per acre could see values as high as $10,000 per acre for that ground. To sell some under bankruptcy would mean a capital gains tax bill on that $8,500 difference, which put farmers under significant pressure. That was rectified in 2017, and if a farm can file under Chapter 12, the capital gains tax on land sold can be deprioritized and discharged as unsecured credit. That can provide a soft landing for a farm trying to get its balance sheet back in order.

But that $4.411 million debt ceiling to filing is a hindrance. Swanson, the Wisconsin attorney, notes that the nature of dairies has changed over the years. A 500-cow operation is considered a smaller family farm. Yet with that many animals, as well as the parlors and crop-raising equipment it takes to run that farm, crossing the debt limit isn’t hard. “You look at what a tractor costs, or 100 acres or a good parlor,” Swanson observes.

Peiffer explains that the U.S. House and Senate are working on a measure that would raise that limit to $10 million, which would be a boon to some farms that right now would have to file under different bankruptcy chapters. “Half the farmers that come into my office are too big to qualify for Chapter 12, but they’re still family farms in my mind,” he says.

I was going to write another snarky Animal House riff, but changed my mind.

Email your House Rep. Call your Senators. Raise the limit on Chapter 12.


Dismantling the Myth of ‘The Heartland’ [New York Times]

In the end, Hoganson is not overturning the heartland myth to demonstrate that Midwesterners are cultivated citizens of the world, but rather to prove that they are, and always have been, “agents of empire.”

If the Midwest was once a place to indulge in fantasies of innocence and escapism, it is now regarded as the locus of our worst tendencies as a country, a dead zone to offshore national guilt. It is the place we turn to in our darkest hours, to discover what lies in our own hearts.

LOL. NYT gonna NYT.

Bill de Blasio winning those Midwestern hearts and minds one camo-wearing diner patron at a time.


Whataburger exploring sale, company confirms after hire of Morgan Stanley [Dallas Morning News]

Citing a source, Reuters reported that the privately held company’s value could top $6 billion.

The Business Journal reported that Whataburger posted sales of more than $2.2 billion in 2017, citing trade publication QSR. The figure placed the chain 22nd among QSR’s 50 biggest limited-service restaurants based on sales, above others such as Hardee’s, Carl’s Jr. and Five Guys.

If you’re not part of the Whataburger Revolution, you have no idea what you’re missing.


The Zeitgeist – 5.16.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


JPMorgan App Draws Millennial Investors With Lure of Free Trades [Bloomberg]

From the headline, I thought they were going Full Robinhood, but no, it looks like your usual gym-bag-and-a-toaster kind of offer.

There has been a clear, concerted effort – with click-hungry financial media happy to oblige – by missionaries of banking to make the narrative about US banks a modern, fintech-oriented technology story. There’s a reason these stories routinely sit at the top of the Zeitgeist – because banks want to be conflated with these much more exciting, growthier sounding, less LOL-whoops-we-almost-broke-the-system-through-sheer-avarice sounding ideas. And like this free trades offer – which is a modestly expanded version of what has been offered by brokerage firms for decades – most of those stories are part of that cartoon.


High Velocity Retail – Why The World Retail Congress 2019 Was A Breath Of Fresh Air [Forbes]

Quote the first:

Quote the second:

Oof.

If you pay much attention to the network maps we post with our Daily Zeitgeist, you’ll know that retailing and consumer products routinely command a highly connected cluster within them. Part of that is because financial and markets-focused media know that even professional consumers of their content are more interested in stores and stuff they buy themselves than they are with utilities companies, or, say, fabricators of high-temperature, high-strength alloys for use in furnaces at petrochemical facilities.

So it’s not a surprise that stories like this rise with some frequency.

It also shouldn’t be a surprise that happy-clappy all-is-well stories like this find their way to the top. Even when the industry in question is tire fire territory, financial media are cheerleaders, publishing news which is almost universally more positive in sentiment and affect than any other major form of news – certainly more positive than political news, at any rate.


Ready Or Not, The Food Of The Future Is Coming [Forbes]

Oh, look. It’s another one.

Anyone who has ever been to an industry conference like this knows that this is ALWAYS the reaction. The early afterglow is always some variant of “Wow, for the first time, we are finally speaking the truth about what’s going on in our industry! What a change from all the old conferences where it was just more of the same.”

Every industry’s conferences are exactly the same. Why? Because saying we’re going to do something in front of a group of people is how we give ourselves the moral license not to do anything.


A New ETF To Refresh The Value Factor [Benzinga]

Most of the keywords that led to this article’s connections are in this paragraph. Just my opinion from looking at the narrative data every day, but it certainly feels like the sell-side and financial media drums are back to beating “value rotation.”

Tobias is one of those weird remaining ‘value guys’. We like him and wish him success.


Trump Tells Pentagon Chief He Does Not Want War With Iran [NY Times]

Four things:

  1. Well, that’s reassuring.
  2. Remember, ‘according to several administration officials’ means ‘intentionally leaked by the White House.’ Why am I reading this NOW?
  3. “Clerical-led” and not “cleric-led?” That turn of phrase feels bad in the brain and worse on the tongue.
  4. Life imitates the Simpsons.

Selling because of the trade war turbulence could cost you a lot of money over the long term [CNBC]

I usually find these “if you miss the 10 best days” pieces a bit tiresome, but the core idea here is right. For most people, betting on the non-existent odds of a game of chicken would take the form of selling, and going underweight equities vs. their long-term allocation or policy.

We’ve been suggesting that’s the wrong idea since December, and we’re still suggesting that overweight or underweight bets driven by trade and tariffs views are little more than a flip of a coin, with a seller taking on a negative expected payoff to boot.

What would make us start to re-examine that? Signs of explicit messaging that the Trump administration views crashing the tractor / going off the trade war cliff as an acceptable outcome in service of another (i.e. political/electoral) game. The characterization of the trade dispute as a matter of national security, something we’ve seen some seeds of in the last couple days, is one way that could take place.

The Zeitgeist – 5.15.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 15, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Stocks Stabilize as U.S.-China Trade War Enters New Stage [NY Times]

Still, the tone across financial markets was positive.

The original headline was ‘Stabilize’; it’s since been changed to ‘Rebound’.

You see this sort of revisionism a lot these days. Of course, if it had been anyone but the NYT, they would have used ‘Recover’ instead of ‘Stabilize’ and ‘Soar’ instead of ‘Rebound.

We’re only in the Denial stage of the market grief cycle regarding the potential death of a US-China trade deal.


The Pivot In U.S.-China Trade Policy May Herald Long-Term Tension [Seeking Alpha]

Additionally, and importantly, years of negotiating with China have left bipartisan scars in Washington. U.S. negotiators feel that many previous negotiations have played out in a similar fashion: lots of talk, promises of concessions, and perceived advancement, followed by equivocation and backpedaling when the time actually came for China to deliver. While other administrations have pursued a more patient approach, Trump (and many other policymakers in Washington) seems to have little tolerance for this now and is willing to take a more direct approach.

Lastly, China trade issues play well with Trump’s base politically, so keeping them in the headlines as the 2020 campaign season intensifies could have benefits for the president.

Not quite sure why PIMCO is now a Seeking Alpha contributor with 306 followers, but whatevs.

From a narrative perspective this is interesting to me because PIMCO is definitely a Missionary, and the more Missionaries who take this stance, the sooner we advance along the Kubler-Ross scale.


How Viable Are AOC’s Green New Deal Energy Proposals? Just Ask Europe [Fortune]

No country on Earth has tried to implement all the Green New Deal ideas at once—it’s a policy smorgasbord heaving with environmental, social and stimulus-related offerings. Critics have painted the resolution as radical, but many of its social elements are so common in Europe they’re almost taken for granted, such as universal healthcare. And two of its energy-related proposals have started to become reality there, too. Europe has, in essence, tested the viability of transitioning to renewable energy and making houses more energy efficient. And the results of those experiments are worth inspecting, particularly when it comes to timing and the question of jobs.

Honestly, I was expecting this article to be a fountain of Fiat News. It’s not. The simple fact is that we CAN implement many of the Green New Deal policies if we choose to do so, at the cost of structurally lower economic growth, higher taxes across the board, and greater political polarization.

It’s a political choice FOR a widening gyre.

Which is why I think it’s got legs. Because as much as we all tsk-tsk about the center not holding, we can’t take our eyes off the political entrepreneurs spinning us into oblivion.


Trump says he’ll meet with China’s Xi amid intensifying trade fight [CNN]

The article itself is nothing … a regurgitation of everything else you’ve read over the past few days. But I couldn’t stop staring at this picture of Larry Kudlow.

There’s a famous body of work on how serving as President ages you in office. Here are the three most recent ex-Presidents, with the photo on the left as they entered the White House and the photo on the right as they left.

My strong sense of the Trump White House is that The Donald will look exactly the same when he leaves as when he entered. It’s the people working for him that age in dog years.


Many Americans Will Need Long-Term Care. Most Won’t be Able to Afford It.; the new old age [NY Times]

The United States, unlike many Western democracies, has never created a broad public program covering long-term care. Medicare pays for doctors, hospitals, drugs and short-term rehab after hospitalization — not for independent or assisted living.

That could change one day — imagine a new Medicare Part LTC — but “that will be incredibly difficult to achieve politically,” Ms. Pearson said.

Ehh … not that difficult. Before it’s all said and done, the Boomers are going to pull forward every bit of national wealth for the next 100 years to service their needs.


The Zeitgeist – 5.14.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 14, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Trade-War Safety Zone Seen in Asian Cub Market Favored by Trump [Reuters]

Vietnam, deemed worthy of a special mention by Donald Trump Monday, is already proving an outperformer, with its stocks losing 2% compared with 5% for the broader emerging-market index last week. The U.S. president warned that unless China accedes to his demands, its trade will flow into Vietnam and other countries.

Brazil and Ukraine are also being sized up as beneficiaries of the standoff between the world’s two largest economies as investors pursue war-proof strategies and places to escape the worst weekly losses in global stocks since December.

This sort of blue sky projection lasts until China starts talking about devaluing its currency. Again.

And then all EMs will tank, especially these “Asian cubs”. Again.


Starbucks Completes Issuance of Third and Largest Sustainability Bond [Press Release]

As with the two previously issued Sustainability Bonds, funds will support ethically sourced coffee. The scope includes purchasing coffee that is verified by Coffee and Farmer Equity (C.A.F.E.) Practices; the continued development and operation of Farmer Support Centers and agronomy research and development centers in coffee-growing regions around the world; and new and refinanced loans to coffee farmers made through Starbucks $50 million Global Farmer Fund.

The 30-year Sustainability Bond is part of a larger bond offering of $2 billion, with another $1 billion bond issued for general corporate purposes including the repurchase of common stock as part of the previously communicated $25 billion shareholder return target. The issuance is in line with Starbucks commitment to a leverage cap of 3x lease-adjusted EBITDAR and a minimum credit rating of BBB+Baa1.

I couldn’t find any information on pricing or the coupon associated with this $1 billion, 30-year note, although the prior 10-year $500 million offering went out at 2.45%.

ESG comes to corporate finance.


Cotton Drops by Exchange Limit as U.S.-China Tensions Escalate [Bloomberg]

The U.S. is the world’s top cotton shipper and more than three-quarters of the domestic crop goes into exports, which are heavily dependent on China. Escalations in the trade war come at a time when expanding production meant American inventories were forecast to reach a decade high.

Don’t worry, Mr. Cotton Farmer, I’m sure the USDA will designate you as a Patriot Farmer.


Goldman Says Trade-War Escalation to Drive U.S. Inflation Higher [Bloomberg]

President Donald Trump’s latest tariff increase on Chinese goods will drive up the Federal Reserve’s preferred measure of underlying inflation, and a further escalation of the trade war will have an even greater impact on prices as well as economic growth, according to Goldman Sachs Group Inc.

Will be proclaimed as “transitory” by the Fed.

So it doesn’t exist.


Cheaper drugs would lead to fewer new drugs [Albuquerque Journal]

You’re a wise and careful person, so you calculate your likely expenses and how much you can charge for your tender young lambs. The math says sheep farming will offer you a tidy little living. But just as you’re about to commit, the government announces price controls on lamb, which will eliminate your profits. Do you still open the sheep farm?

I get so depressed when self-styled libertarians (in this case the Washington Post’s Megan McArdle) shill for oligarchic corporate interests that have captured huge swaths of the regulatory state.

As if Big Pharma’s profit margins aren’t created and maintained by government policy in the first place.

I never know if they’re just mailing it in or if they’re on the make.


$1.2 trillion in stock market value lost so far from trade war sell-off with more expected [CNBC]

You never see how much was “added” to stock market value on a big up-day like today.

That’s intentional, of course, part and parcel of the creation of tiny-hurdles-of-worry.


The Zeitgeist – 5.13.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 13, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Farmer financial pain continues from trade fallout [Farm Futures]

A record crop of both corn and soybeans in 2018 has Bible left holding 20-25% of his 2018 corn crop, and 5% of soybeans. Yet going into 2019, he’s forward priced only about 20% of his soybeans and roughly the same amount for his corn.

Hindsight is always easier, as Bible said he should have mitigated risk a little bit better. However, based on the information he was getting from the administration he felt fairly confident that a deal was going to be reached with China by now. With reports that China would buy “tremendous” amounts of corn and soybeans being leveraged to help bring some equilibrium to the trade imbalance, he was hopeful. “When you’re getting that kind of information, you have confidence, whether right or wrong, that things are soon to be better. We’re not seeing that come to fruition unfortunately,” Bible said.

Cheer up, Farmer Bible! I’m sure that the crack team at USDA has a great plan in the works to buy up all your soybeans and corn and give it away to the poors.

Flounder: Will that work?

Otter: Hey, it’s gotta work better than the truth.


Goldman Sachs’ glitzy new trading floor; Billionaire real-estate investor Sam Zell says now is ‘the time to accumulate capital’ [Business Insider]

Goldman Sachs’ glitzy new London trading floor is the size of a soccer field — but traders worry they’ll be ‘caged in like battery hens’

Sounds fair.


Private equity’s allure poses big risks for the stock market and its investors in the next recession [CNBC]

The transition is already underway and according to asset manager AllianceBernstein, won’t be ending soon. In a note to clients this week, the firm outlined an upcoming decade in which the “main expression of active investing” is in private markets.

I think the A/B note is absolutely right, and it’s part and parcel of a core change in the investment Zeitgeist, as capital markets are transformed into political utilities.

But this isn’t a “risk” for the stock market, and the rationales trotted out in this CNBC article (vanishing liquidity! more volatility!) make zero sense and have even less connection to the point of the original A/B note.


Can the Racial Wealth Gap Be Closed Without Speaking of Race? [NY Times]

Elizabeth Warren wants to offer down-payment assistance to home buyers in formerly “redlined” neighborhoods where the federal government once denied access to mortgages. Cory Booker would like to create “baby bonds” that would be worth more to children in poorer families, helping them one day to buy houses or other assets.

Both presidential candidates say their proposals would aid in narrowing the enduring black-white wealth gap in America. But neither policy attempts to do that in the most direct way possible — by steering benefits to African-Americans.

Their ideas, along with several others that scholars advocate, are facing a tricky problem today. There’s growing momentum on the left to address the racial wealth gap. But the prospects for race-based policies before the Supreme Court are unpromising, and that’s unlikely to change with five conservative justices.

If there is a more Fiat News-loaded term than “scholars”, I am unaware what it might be.


Uber falls more than 7% in disappointing Wall Street debut [CNN]

After that mad dash to overhaul its business and go public, Uber ran into a different problem: the Week from Hell.

On Sunday, President Trump surprised investors by threatening to impose higher tariffs on China in a tweet. The market swung wildly amid concerns of an escalating trade war between the United States and China.

Then on Tuesday, Lyft reported its first earnings report since going public, which revealed more than $1 billion in losses during the first three months of this year. Lyft stock continued its decline the day after.

Uber picked a bad week to stop being private.


It’s Time to Break Up Facebook [NY Times]

Mark is a good, kind person. But I’m angry that his focus on growth led him to sacrifice security and civility for clicks. I’m disappointed in myself and the early Facebook team for not thinking more about how the News Feed algorithm could change our culture, influence elections and empower nationalist leaders. And I’m worried that Mark has surrounded himself with a team that reinforces his beliefs instead of challenging them.

The government must hold Mark accountable. 

Like every other oh-so-earnest opinion piece you see in the NYT, the author and the editor and the publisher think they’re being effective advocates for their preferred policy outcomes.

They’re not.

I’m VERY sympathetic to the idea that antitrust law should be used like a flamethrower against Big Tech and Big Banking, but this article made me throw up in my mouth a little bit.

There are good reasons to apply antitrust law to Facebook. None of them have anything to do with Mark Zuckerberg.


The Weekend Zeitgeist – 5.11.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories. On the weekend, we leave finance to cover the last week or so in other shifting parts of the Zeitgeist – namely, politics and culture. It’s not a list of best articles or articles we think are most interesting … often far from it.

But these are articles that have struck a chord in narrative world. 


May 11, 2019 Narrative Map – Non-Financial Articles

Source: Quid, Epsilon Theory

Commentary: Capitol Hill hearing takes up the war between the needy and the greedy: The future of payday loan regulation [Winston-Salem Chronicle]

This topic was at the top of our Friday Zeitgeist, too, so I won’t spend too much time talking about it. But one of the responses I’ve gotten in a couple places has been: “Why can’t people talk about this issue in good faith? It’s just policy.” This is why.

Once an issue has been moved to the world of abstraction, once it’s about something else other than itself to a meaningful portion of the population, it is far more difficult to have a good faith discussion with anyone who has absorbed the abstraction into their framework of thinking about the issue. The participants in most of these discussions are simply engaged in a complex soliloquy about their own particular abstracted version of the topic.

Still, make no mistake – the people committed to good faith can’t wait for the rest to catch up. That’s an argument I’ve made before, too. Payday lending is a topic of its own – different even from the very high rates of standard unsecured / auto lending. I’ve got a lot of opinions about it, too, but it’s the weekend, and I’ll spare you those. This one sits at the top of the Zeitgeist, and it’s not going anywhere for a while.


The Double-Edged Sword of the Justice System [Chronicle of Social Change]

Criminal justice and the state of the US prison system have been frequent visitors to the Zeitgeist, too. If you see it here, expect to see it in policy discussions. If you don’t know what you think about those issues, now’s the time to do your research and thinking, before the content you’ll find becomes dominated by Fiat News that will tell you how to think about it.


The Bulgarian city reversing the brain drain [MSN]

There hasn’t really been an active narrative – in the US, I mean – about eastern Europe since the early days after the fall of communism and the dissolution of the Warsaw Pact. At that time, and in many eastern European nations, the growth – in terms of both freedom and in more tangible economic terms – was remarkable.

Except that didn’t really happen in Bulgaria. As it happens, Bulgaria’s first free elections put the communists right back in power. Its economy grew in fits and starts throughout the 1990s, unlike the Baltics and states of the former Czechoslovakia. Serbia had a similar experience, but it was a special case in a lot of ways – thanks to Tito, probably not a true part of the Eastern Bloc during the Yugoslav days despite its communist government, and thanks to Milosevic, subject to some, shall we say, other sources of economic malaise in the late 1990s. By the mid-2000s, Bulgaria had recovered enough to become a more integral part of Europe, and stabilized.

Even so, that a country that has sat at the crossroads of the world – culture, religion, peoples – for so many centuries could lose citizens at this rate is still surprising to me. Maybe a little bit heartbreaking.


‘New economics’: the way to save the planet? [Reuters]

Here’s the lede:

Here’s the internet masthead categorizing the article as “World News.”

Here’s the footer characterizing what took place in the article as “Reporting.”

I’m sure you don’t care, Directors of Thomson Reuters Founders Share Company, but your news staff is using your Trust Principles as a dishrag.

Do better.


Let the sunshine in at the Federal Reserve [WND]


You know, Stephen, you could have just gone on Glassdoor and left a brutal review like any normal person does after bombing an interview.


The lost art of the mixtape [Schenectady Daily Gazette]

The headline on this article was changed after the fact, which is a shame, because Googling the “lost art of the mixtape” provides some powerful evidence of our nostalgia for this relic of the 1980s and 1990s. I still remember fashioning the perfect mix of songs for my 7th Grade girlfriend Vanessa. It was the ultimate low-tech labor of love, sitting in my bed at night with the radio playing on my tape player, waiting for one of the songs I knew I wanted to come on, finger on the Record button. It was the work of dozens of hours, culminating in a cassette with a strip of masking tape that would allow me to write my title. Never actually given because I was a cowardly 12-year old.

I was about to write about my frustration with the conflation of “playlists” with this experience in the linked article and in these Google results, but then I realized that I’m 36 years old and not ready to yell at the kids to get off my lawn just yet.


The bird that came back from the dead [CNN]

The white-throated rail colonized the Aldabra Atoll in the Indian Ocean -- twice.

We end with a short, interesting article about a sort of convergent evolution that, well, ain’t, as it were.

But the real story here, if you ask me, is this goofy-looking bird. It looks like a wingless, arthritic duck, and it probably shouldn’t exist.

The Zeitgeist – 5.10.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 10, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Coworking Ecosystem & Crowdfunding Platform Announce Partnership [Press Release]

Digital Asset Monetary Network Co-Founds Marketing Services Firm for Reg A and Crowdfunding Ventures [Press Release]

Back in the distant past when there were people in our industry called value investors (if you’re under 30, you’ll have to ask a coworker born before 1990), it was common to hear them wax eloquent about companies which had found an ecological niche inside the coverage gaps of larger industries and fully scaled competitors. It wasn’t whether your hedge fund was long a dental supply company, you see, it was whether you liked PDCO or HSIC more.

Coworking and crowdfunding occupy exactly those kinds of ecological niches, emergent in response to the resource availability-skewing dominance of commercial real estate and DCM/ECM/VC conventions. These are not realistic scale plays. By any historical analog, they should be very interesting, higher-than-big-cap-comp ROIC businesses, maybe even trading at interesting valuations.

That was, of course, until we discovered the cost-of-capital reducing magic of riding the valuation coat-tails of venture tech narratives. This now trendy tactic is, perhaps, irritating to those nostalgia-porn addicted stalwarts who still call ourselves value investors, but it may be the only benign influence of the zeitgeist-transformation of capital markets into public utilities. With obvious exceptions, the people who have been pushed out on the risk curve, who are now taking even more insane risks in entrepreneurial ventures on the basis of these narratives – or occasionally on the basis of some fundamental belief in actual disruption – are the people who can most afford to bear them. It’s a good thing. Even if we think what they are doing is stupid, the people who sink their effort, reputations, capital and time into an entrepreneurial venture make the whole system work. It’s the other side of the coin from our concerns about financialization and the lack of incentive for public companies to reinvest in growth.

Or in other words, as is so often the case, Taleb’s not wrong. He’s just an asshole.

Image result for you're not wrong walter

Wall Street Dusts Off Trade-War Battle Plan Now All Bets Are Off [Bloomberg]

When I say that the ol’ fire your guns at the ground and tell ’em to dance bit is one of the oldest tropes in the book, I mean that literally. It comes straight out of one of the earliest, most influential, most ‘anatomically modern’ films ever made: 1903’s Great Train Robbery.

And that’s exactly what this is.

Dusting off the battle plans? Hell, these hedging strategies, baskets and tactical trading approaches haven’t even been moved from that folder on our desktop to our personal network storage drives in the monthly purge we do so that IT doesn’t bark at us. You may not know the odds of the Game of Chicken that is the US/China Trade & Tariffs war, but I hope you know the odds that financial media will do their part to support the ecosystem that feeds on our collective aversion to inaction in the face of incalculable odds.


Investors pull more than $20 billion from stocks on ‘trade deal trauma’: BAML [Reuters]

Trauma! So we’re breaking out the big guns on language after we’ve had a couple days of completely normal volatility. I guess that means it’s time to play our favorite game: Who’s Going to Blame Risk Parity First?

The winner usually comes in the week following the volatility, but since it has become such a popular game, triggers have gotten a bit looser. So do we have a winner yet? Did someone jump the gun?

Yes! Two people!

Our search of the Newsdesk database shows a number of articles referring to “risk parity”, “risk targeting” or “vol targeting” this week, most of which are reprintings of comments made by AQR’s Cliff Asness about factor investing performance. The first of the two articles which mention it in context of volatility-blaming comes from Justina Lee at Bloomberg; however, her article shoots down the theory. So by default, the award this drawdown goes to Nomura’s Charlie McElligott, whose Wednesday morning note got picked up by ZeroHedge.

Congratulations! You Blamed Risk Parity First!

Trophy

My Cousin Was My Hero. Until the Day He Tried to Kill Me.; Feature [NY Times]

I don’t have much to say about this article, although I’ll leave you to consider why this scored so high on its interconnectedness to the language in all financial markets news stories from the last day.

What I do have to say is that I’m glad the NY Times has started flagging its articles as Features, at least in its database feed. Press insiders who care about its integrity and the critical role it must play in a free society should be demanding the clear, unequivocal marking of opinion, analysis and feature journalism by all outlets. It doesn’t go anywhere near fixing the problem of Fiat News, but it’s a good step.


How Today’s Tech I.P.O.s Differ From Those of the Dot-Com Boom [NY Times]

This is not a terrible piece in the aggregate, but the statement above is not something that belongs in a news report. It’s a near-verbatim parroting of the right-sounding cartoon that’s being promoted by the management teams and banks running these processes. They have had more runway to figure out how to get BIGGER, and all of these parties have an interest in us equating that abstraction with “figuring out sustainable business models.”

Unless we’re all capital-markets-as-utilities advocates now, and “continue to raise capital at shockingly low costs ad nauseam to finance profitless top-line growth” IS a sustainable business model. From a founder’s perspective, maybe there’s not a difference.


Fair Isaac Is Profitable, But Its Debt Is Climbing And It’s Expensive [Seeking Alpha]

So meta.

Part of the reason this piece – a pretty standard Seeking Alpha blog – is more connected to the aggregate narrative right now is the broader discussion about progressive politicians’ proposals to institute usury-style caps on chargeable rates.

It’s an issue that Ben and I disagree on from a practical (read: policy) perspective. But we sit in agreement on the core problem.

If you wandered into an off-brand car dealership in 2004 or 2005 and had a sub-600 FICO, chances are that one of the rates offered to you came from my desk. Well, the buy rate did, anyway. The finance guy at the dealership probably bought it up 100-200bp without telling you. There’s one exception: if you lived in Arkansas, you probably didn’t get a rate from me. Why?

Because the Arkansas Constitution wouldn’t let us charge as much as we felt we needed to to compensate us for the credit risk (and as years that followed would indicate, even what we were charging probably wasn’t enough). There is no doubt in my mind that the market-clearing, risk-appropriate price for unsecured – or kinda/sorta secured, like auto – debt for many consumers is well into the high 20s and above. My libertarian predisposition is to say, ‘Let people be adults and burn their hands if they want to.’

But I’ve also seen – no, built – the economic models supporting this kind of lending. You do not enter in with the expectation that you will be paid back principal. You enter into the average loan with a significant portion of your expected return in the form of recoveries. You are pricing in the dear cost of brutal collections and servicing agents. It is an inherently ugly and cruel practice, entered into with the one-sided expectation that it will very likely end in ugliness and cruelty.

Is it uglier or crueler than denying the availability of that credit by statute? I still come out to “No.” I can’t stomach denying capital to anyone who wants to bet on themselves. I think Ben comes out to “Yes”, and he’s got damn good reasons for it. After all, the cruelty of this kind of lending isn’t a theoretically possible outcome – it’s embedded as a fundamental component of the model. But Ben and I are really close friends, and we trust the other’s heart and mind implicitly. We can talk about this stuff.

Outside those circles? Well, like the Myth of College, this is an issue made almost impossible to discuss and debate in good faith by the Widening Gyre.

The Zeitgeist – 5.9.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 9, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

China Backtracked on Nearly All Aspects of U.S. Trade Deal [NY Times]

Process stories (what’s happening behind the scenes at the campaign / the White House / the locker room / the negotiations) are the original Fiat News. They are designed to make you angry and further the aims of whoever sourced the “reporting”.

Who benefits from making you angry at China and their “reneging” on a deal that never existed in the first place? Who benefits from a narrative of the Lying Enemy Abroad?

Think about that before you engage in your Two Minute Hate.

Oceania has always been at war with Eastasia. Or was it Eurasia? I don’t seem to remember so well these days.

The NYT is running hard with this story because they think it reflects badly on Trump. LOL. It’s HIS story.

More evidence that the NYT is the worst metagame player in the history of the world.


Trade Talks Have Two Key Implications for Markets [Bloomberg]

Each Word of Trump’s Tariff Tweets Wiped $13 Billion Off Stocks [Bloomberg]

How To Trade The China Trade War [Forbes]

Once more with feeling …

THERE ARE NO ODDS IN A GAME OF CHICKEN.

It’s not 50/50. It’s not 60/40. It’s not whatever you think they are. You have no edge and there are no odds in the China trade talks. Just stop it.


Delays to Brazil’s Pension Overhaul Raise Economic Concerns [Dow Jones]

“My costs have increased 20% [in two years] because of the stronger dollar,” Mr. Carvalhal said in a bare-bones office in his sprawling warehouse stocked with Argentine wine, German beer, Spanish cheese and other imports. “How can I pass that along to the consumer if the economy is tanking?”

The only bright spot for him and millions of other businesspeople and consumers comes from Brazil’s central bank, which on Wednesday is expected to hold its benchmark interest rate, known as the Selic rate, at the historic low of 6.5% where it has been at since March, 2018.

The dollar is now stronger than it was when the world was going to end in January 2016.

What do you think the odds are for a Shanghai Accord today? LOL.


Dimon Says Yields `Extraordinarily Low’, 4% Wouldn’t Be Bad [Bloomberg]

My president.


Lyft’s stock is plunging, flirting with a record low after its first public earnings report fails to impress investors [Business Insider]

I’m old enough to remember when a company wouldn’t go public until it was ready to rock with a stellar first public earnings report to confirm all those sell-side firms initiating coverage with a Strong Buy.


Business Genius Trump Lost More Money Than Anyone in America Between 1985-1994 [Rolling Stone]

Oooh, they’ve got him now! Burn … sick burn!

Yawn.


The Zeitgeist – 5.8.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 8, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Renewed China trade fears send U.S. markets tumbling [UPI]

Futures fall on U.S.-China trade uncertainty [Reuters]

Global stocks slip, bonds rally as U.S.-China trade fears grow [Reuters]

Frequent readers will be familiar with our three recurring trade and tariffs arguments:

  1. The narrative on tariffs has been complacent for the last several months – coherent and positive. Investors who have a contrarian (read: negative) view of outcomes could benefit from the resulting asymmetry.
  2. If it ends up as a major market event, it is likely that traditional diversification techniques continue to work like they have historically (i.e not a ‘new’ zeitgeist).
  3. We don’t think anyone should be in the business of having those contrarian OR consensus views on the topic, because it’s a GAME OF CHICKEN. You don’t know the odds, because there aren’t any.

None of that has stopped financial media from updating their assessments of the odds on a daily basis, of course.

These are the sectors that worry Wall Street analysts the most if there’s a US-China trade war [CNBC]

None of that has stopped the sell side from pushing new ways to play the odds, either.

Goldman Sachs – Hardline Retail Stocks

UBS – Softline Retail Stocks

Cowen – Chemical Stocks

Credit Suisse – Auto Parts Stocks

Bank of America – Automobile Stocks

Needham – Semiconductor Stocks

Baird – Chemical Stocks

Let’s get trading, fellow muppets!


Data Gumbo Secures $6M in Series A Funding from Venture Arms of Leading International Oil & Gas Companies [Press Release]

HOUSTON–(BUSINESS WIRE)–Data Gumbo Corp., a Houston-based technology company that has developed a Blockchain-as-a-Service (BaaS) platform to streamline smart contracts management for industrial customers, announced today completing a $6M Series A equity funding round co-led by Saudi Aramco Energy Ventures, the venture subsidiary of Saudi Aramco, and Equinor Technology Ventures, the venture subsidiary of Equinor, Norway’s leading energy operator.

Wait, what?


Sysco’s Earnings Beat Estimates but Revenue Comes Up Shy [The Street]

I wonder why this perfunctory note scored so high on the Zeitgeist.


Americans mimic Russian disinformation tactics ahead of 2020 [The Hill]

The widening gyre is only beginning.

And this is how it widens – as always, with the best intentions.


AIG Unit Rebounds After an Overhaul [WSJ]

What is dead may never die.


The Zeitgeist – 5.7.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 7, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

May’s Market Outlook: It’s Too Quiet Out There [The Street]

Investment markets can be confusing. To try to cut through the chatter and investment slang, we present this monthly view to you. We want to give you a 50,000-foot view of market conditions updated as our view evolves. Currently, our Investment Climate Indicator remains at Stormy. Stormy means that bear market rules apply, and we believe could be a period of wealth destruction.

I used to watch Ernest Angley on Sunday morning TV in Birmingham, Alabama. Laying on hands, curing the sick, healing the lame … I’d call him a raccoon, but somehow that seems too kind. A raccoon’s raccoon.

Buffett is no raccoon. He’s a coyote. A coyote’s coyote, even. But there was something about this picture that triggered me.

I haven’t made the hajj to Omaha yet.

As for The Street … raccoons just as far as the eye can see.


Vanguard Fund Investors Get Control of Paying Taxes [Bloomberg]

Ever wonder why you don’t ever get hit with a year-end taxable gain from ETFs like you do with mutual funds?

But thanks to an obscure loophole in the tax code, ETFs almost always avoid incurring taxable gains.

The rule says that a fund can avoid recognizing taxable gains on an appreciated stock if the shares are used to pay off a withdrawing investor. The rule applies to both ETFs and mutual funds, but mutual funds rarely take advantage of it because their investors almost always want cash.

ETFs use it all the time, because they don’t transact directly with regular investors. Instead, they deal with Wall Street middlemen such as banks and market makers. It’s those firms, not retail investors, that expand the ETF by depositing assets or shrink it by withdrawing. These transactions are usually done with stocks rather than cash. The middlemen, in turn, trade with regular investors who want to buy and sell ETF shares.

Trading with middlemen presents ETFs a tax-cutting opportunity. Whenever one of these firms makes a withdrawal request, an ETF can deliver its oldest, most appreciated stocks, the ones most likely to generate a tax bill someday.

If the ETF wants to cut its taxes further, it can generate extra withdrawals just to harvest the tax break. A heartbeat is when an ETF asks a friendly bank or market maker to deposit some stock in the fund for a day or two, then take different stock out. Some critics call these trades an abuse of the tax code. But with the help of heartbeats, most stock ETFs, even ones that change holdings frequently, are able to cut their capital-gains taxes to zero.

Now Vanguard is using the same in-kind redemption / heartbeat trade to avoid taxable gains on most of their mutual funds.

How? By pairing the mutual funds with a sister ETF where they can do these legal (for now) variations-on-a-wash-trade.

But wait, there’s more. They’ve filed a patent on this.

So amazing that I’m not even mad.

This is the ET note on Vanguard. It’s a good read.


Why Investors Love Singapore’s Struggling Malls [The Straits Times]

Singaporeans aren’t spending like they used to, at least not in malls. There are too many already, and more are being built. But investors still have good reasons to back mall owners.

The city state has 6.1 million sq m of retail space, of which 8.7 per cent is vacant. Yet, companies are forecast to add a further 364,000 sq m, with the biggest chunk hitting the market this year. This is when online shopping is catching on, retailers such as Crabtree and Evelyn are closing physical stores, and rents are scraping the bottom.

Two years ago, the median tenant was shelling out $9.76 per sq m in the main shopping district of Orchard Road, when the going rate for category 1 offices was $8.65. Now, office rentals have zoomed to $10.18 – 30 cents more than top-grade retail space – while prospects for a spending recovery aren’t great. CapitaLand Mall Trust, the island’s biggest shopping mall landlord, classifies its tenants in 17 categories, out of which 11 – including supermarkets and department stores – saw sales fall for the first quarter from a year earlier. Telecommunications, home furnishings and music and video led with big double-digit declines.

Okay, I give up. What is the good reason for investors to back Singapore mall REITS?

Paradoxically, real estate investment trusts (Reits) that own malls are outperforming the benchmark Straits Times Index. Interest rates may be a part of the story. With global rates expected to stay lower for longer, a 5 per cent dividend yield on CapitaLand Mall’s shares implies a near 3 percentage point spread on 10-year Singapore government bond yields.

Wheeeeee!


As Public Pensions Pile on More Risk, Returns Don’t Follow [Bloomberg]

Pro-tip: when a financial reporter uses the phrase “so-called alternatives” in the lede, it’s always a train wreck.


TA Associates Closes Thirteenth Flagship Private Equity Fund with $8.5 Billion of Commitments [Press Release]

TA Associates,a leading global growth private equity firm, today announced the first and final closing of TA XIII with total commitments at its hard cap of $8.5 billion. Launched in the first quarter of 2019, TA XIII was oversubscribed and exceeded its original $7.5 billion target.

Wheeeeee!


Blackstone Hires Goldman Alum for New Social Good Initiative [Bloomberg]

Blackstone Group LP hired Tanya Barnes, a former managing director at Goldman Sachs Group Inc., to lead a new impact investing strategy, as pension plans and other institutions seek to put money into more businesses with social and environmental benefits.

Blackstone’s impact initiative will fall under its Strategic Partners group, run by Verdun Perry, and focus on investments advancing health and well-being, financial access, sustainable communities and green technologies, according to the New York-based firm. Along with direct investments, the strategy will include co-investing with other managers making socially conscious bets, Barnes said.

Ah, to live in a world where the phrase “socially conscious bets” can be uttered without a shred of embarrassment. Glorious!


Trump’s Tariff Tweets Do the Markets a Big Favor [Bloomberg]

President Donald Trump’s threat on Sunday to levy additional tariffs on Chinese goods because of the slow pace of trade talks sent the S&P 500 Index down by as much as 1.61 percent before it recovered to end lower by a less jarring 0.45 percent on a report that a delegation of Chinese officials still plan to travel to Washington this week to talk trade. The initial decline was painful, for sure, but cathartic as well, in that it should act as a sort of reset and make the market healthier following a nearly unimpeded trek upward this year. 

I wonder if today was a “healthy pause”, too.

Every now and then my old firm would hire an analyst who would tell me that he was “glad” the stock we owned (and he covered) was down, because now “we could buy more”.

There’s only one proper response to this.

“Not counting today, how long have you worked here?”